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Before any person is considering investing in Options, he or she has to know what they are, and how they work. First of all, one should know that an Option is a contract, which give

According to USFDA, a combination product is one composed of any combination of a drug and device; biological product and device; drug and biological product

s the owner the right to buy or sell shares of stock ( or an asset) at anytime before or on the expiration date of the option. Just like with equities, an investor may also decide i

; or drug, device, and biological product and fixed dose combination would include two or more combinations of drug.

Examples of combination products may in

f he or she wishes to take a short or long position on the asset depending on how they wish to play the trade. A call option is a contract which allows the owner to buy 100 shares o

lude drug-coated devices, drugs packaged with delivery devices in medical kits, and drugs and devices packaged separately but intended to be used together.

stock, or take a long position on it before or after the expiration date, whereas a put option is a contract which allows the owner to sell 100 shares of stock, or take a short posi

here is enormous increase in the number of combination products entering the market in the recent years. Combination products have proven advantages but fixe

tion on it, before or after the expiration date.

Similar to the stocks in consideration, Options are likewise traded in the same fashion, and thus each one has its own bidding price

d dose combinations are still in the process of convincing regulatory authority on their advantages over the single ingredient formulations.

Combination pro

and expiration. A certain option may only be executed or as traders more commonly say, exercised anytime before its expiration date. This is what makes options trading a risky busi

ucts have become life saving products for the pharmaceutical companies who doesn’t have many innovative molecules in their product pipeline and have been inc

ness. Of course, when buying an option, it is said that your loss is limited to the premium of the option, which is the bidding price of the option. To understand this better, it i

easingly used in the product life cycle management. Even the companies having product patents are trying to extend their product life cycle through the combi

imperative to know what determines the bidding price.

The bidding price depends on several factors, namely the current market price, the expiration time, and the volatility of the

nation products and maximize the revenues. But the companies involved in this practice are overlooking that they are burdening the patients both economically

underlying stock. The current market price determines whether an Option has intrinsic value or not. An Option is said to have intrinsic value (or in-the-money) when the current mar

and physically. They need to rightly judge the benefits of the combination products and they have to even look at the risks involved when combining the produ

et price promises a profit in trade. A call option is said to have intrinsic value if the exercise price of the contract is lower than the current market price. Why? With the righ

ts. Some of the combination products were well accepted by physicians while others suffered. Companies involved in development of combination products are fi

t to purchase shares at lower prices, investors get to enjoy bigger savings. Similarly, a put option is said to have intrinsic value if the exercise price of the contract is higher

ding difficulty in defining their combination products and facing various challenges from selecting a combination to marketing it.

Following aspects would a

than the current market price. Why? With the right to sell shares at higher prices, investors enjoy additional profit. A secondary part of the option premium is the time premium.

dd to the challenges in developing combination products:

Which markets to tap where the combination products can do fairly well?
Which combination prod

The time premium is dependent on the time before the contract expires.

A longer time would represent more time to monitor the behavior and movement of assets, therefore allowing inv

cts are meaningful and rational?
Which therapeutic categories to select?
Which Combinations can address unmet needs of the patients?
Do combin

estors to modify their trade strategies accordingly, which is why the further out the expiration date, the bigger the premium. The last factor is the volatility of options. Volatil

tions increase the patient compliance?
What would be the developing cost?
How to tackle the risks encountered during combination product developmen

ty, in this context, refers to the impression given by the behavior of the underlying asset. An asset, for example, with a consistent trade record is considered to be of low volatil

t?

As combination products don't fit into the traditional categories of drugs, medical devices, or biological products, the USFDA is in the process of devel

ity, and is therefore predictable. Such options would have a low premium. On the contrary, if the underlying stock associated with an option were susceptible to violent price fluct

ping new procedures for reviewing their safety, efficacy and quality.

Professional from academic institutions, pharmaceutical industries, health care indust

ations, also called beta, it is said to be of high volatility, and rewarded with a higher premium.

The last thing that an investor must take into consideration is that when an optio

y and representatives from various regulatory agencies are working out to design the regulatory requirements for manufacture and sale of combination products

n reaches its expiration, only the ones with intrinsic value may be exercised, or used to buy or sell the shares which they were meant for. In other words, those that are considered

.

As there is an increasing trend of the combination products companies manufacturing such products should be able to tackle the problems involved in the de

out of money become worthless. This is the reason behind the statement that: When buying an option, your loss is limited to the premium for which you paid for it. If you sell an o

elopment. They need to be wiser in analyzing the market trends and the regulatory requirements.

Companies that provide selfless information through particip

ption, and your loss is unlimited. There are many option strategies that one can employ and master over time

tion in industry events and feedback to regulatory authorities would be able to face the challenges and will be successful in developing combination products

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